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West Asia conflict may cut daily city gas distribution sales by up to 10%India’s city gas distribution sector may see daily sales volumes drop up to 10% due to supply disruptions linked to the West Asia conflict, though cost pass-through may cushion profitability.By Sheersh Kapoor  March 13, 2026, 4:48:23 PM IST (Published)3 Min ReadIndia’s city gas distribution (CGD) sector may see its daily sales volumes decline by 8–10% as supply disruptions linked to the ongoing conflict in West Asia tighten natural gas availability, according to Crisil Ratings Ltd.

The moderation in volumes is expected to persist in the near term until the geopolitical situation stabilises. However, the ability of companies to pass on higher input costs to end consumers is likely to cushion profitability. Strong liquidity buffers, moderate leverage and support from large sponsors are also expected to support the sector’s credit profiles.

India’s CGD industry relies on domestic natural gas for about 60% of its requirement, while imports of liquefied natural gas account for the remaining 40%. Supply disruptions have intensified after QatarEnergy declared force majeure on international deliveries following production disruptions at its Ras Laffan facility, triggering ripple effects across the Indian gas value chain.

The sector comprises three key segments — compressed natural gas (CNG), piped natural gas for households (PNG-D) and piped natural gas for industrial and commercial users (PNG I&C). CNG and PNG-D together account for nearly 70% of the industry’s sales volume and are expected to be the least affected as their gas supply largely comes from domestic sources.

By contrast, the PNG I&C segment, which contributes roughly 30% of total volumes, is expected to be hit the most due to its heavier dependence on imported LNG.

Ankit Hakhu, Director at Crisil Ratings, said daily sales volumes are expected to decline mainly due to reduced natural gas supply to industrial and commercial customers, even as the government seeks to limit curtailment through priority allocation measures.

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Gas traders in India are exploring alternative sources to offset reduced LNG supply, but limited spare capacity in global export markets and elevated spot prices remain key challenges. Asian spot LNG prices have risen sharply to around $19–20 per MMBtu from roughly $10–11 per MMBtu in February.

Gauri Gupta, Team Leader at Crisil Ratings, said operating margins of city gas distribution companies are likely to remain relatively stable despite lower volumes, as higher input costs can largely be passed on to consumers.

However, operating cash accruals may moderate in the near term. Even so, the sector’s credit profile is expected to remain resilient, supported by healthy balance sheets, moderate leverage and liquidity buffers covering more than nine months of debt servicing obligations.

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